EU Wine Exporters Competing in Changing International Markets

Abstract

Wine markets have deeply changed in recent decades in many regards. In particular, wine trade patterns have been deeply reshaped, and this also affects traditional EU exporters, who operate in a more competitive environment, with new players challenging their position and forcing them to readjust their strategies. This study analyzes recent trends in the wine exports of major EU producers. Its goal is to contribute to assessing to what extent their positioning in the international wine markets differs, and to understand the kind of competition they engage in within destination markets, with a focus on the role of their export quality as a major competitive advantage. This analysis only looks at bottled wines, both still and sparkling. It combines the use of traditional trade indicators—such as export quotas, penetration rates, and the average unit value of exports (AUV) with an innovative indicator, called C-Consy, aimed at measuring the sophistication levels of the destination markets. The results show that EU competitors behave in different ways and move along different paths. Some of them show an increasing ability to sell their products in higher segments of sophisticated markets. Others are also quite well positioned in the global arena, but they are fighting to fully catch up with the increasing demand for more sophisticated products from their clients. Some have managed to improve quality and hence advance to higher market segments, while others have shown greater weakness in facing global competition. Looking at typologies, exporters do not always show the same positioning and trends for still and sparkling wines.

1. Introduction

Wine production, trade, and consumption have changed extensively in recent decades. On the consumption side, wine has become a hedonic good characterized by deeply segmented demand and new drinking occasions as well as styles [1]. Overall, the demand for quality wine has grown tremendously almost everywhere compared to its demand in the past. While the quantity consumed is declining in traditional consumer countries, it is rising in countries new to this product. Wine geography has also been deeply reshaped on the supply side, with new producing and exporting countries establishing themselves and gaining prominent roles. The international economic crisis in 2008, China’s rise in global markets more recently, the liberalization of the planting rights system in the EU, and the COVID-19 disruption all deeply affected exporting countries’ competition patterns [2,3,4]. Wine consumption has not changed substantially in terms of volume since 2011. However, production and trade have significantly changed, both in terms of volume and in value. Production in terms of volume increasingly varies according to weather conditions, but, overall, it remains higher than that consumed, so a part of the wine produced is regularly diverted to industrial use. Trade is relatively stable in terms of volume but steadily increasing in value, with the only exception being the years hit by the COVID-19 pandemic [3,4]. Sparkling wines are by far leading the growth in trade, thanks especially to Italian Prosecco but also to French Champagne and Spanish Cava; however, this growth has also pushed the growth of non-sparkling white wines.

All of these changes are having a deep impact on European producer and exporter countries (the so-called Old Wine World) and are changing the competitive environment in which they act, also considering the growing position of the New Wine World in the global arena [5,6].

This paper analyzes wine export flows of major EU exporters (France, Germany, Italy, Hungary, Spain, and Portugal). These countries together cover more than 90% of European wine exports to the rest of the world (Bulgaria is also a relevant exporter in terms of quantity, but its wines are considered to be of a lower quality compared to the other big EU exporters and are predominantly directed to neighboring European countries [7,8]). Its goal is to assess to what extent their positionings in international wine markets differ and to understand the kind of competition they engage in within destination markets, with a focus on the role of quality as a major competitive advantage and source of value. The analysis looks at bottled wines, both still and sparkling. It combines the use of traditional trade indicators—such as export flows, quotas, penetration rates, and the average unit value of exports (AUV)—with an innovative indicator called C-Consy, aimed at measuring the sophistication levels of the destination markets. This indicator—based on the per capita GDP of the destination countries—is used to analyze the kind of competition exporters engage in with their different clients’ markets [5,6]. The combined use of AUV and C-Consy allows us to look at the role of quality from different perspectives and hence provides a sound and original analysis of the ways exporters target different market segments and compete in different client markets. According to a wide breadth of research, in fact, capacity and growth in international market sales depend on the ability to export a greater variety of products to more countries [9,10]. The data used cover the period 2010–2022; this allows us to obtain a dynamic picture, tracing the competitive trajectories of the countries in this study.

The paper is organized as follows: After this introduction, Section 2 briefly summarizes recent trends in wine markets with an eye to the role of EU exporters. Section 3 presents the methodology of this paper, the overall logic, the nature, and background of the proposed C-Consy indicator, and illustrates the dataset. The results are presented in Section 4, while Section 5 concludes and offers some highlights of trade strategies and policy implications.

2. EU Exporters in the Global Market: A Short Review

The wine industry has undergone deep changes since the late 1980s, with growing globalization and significant improvement of product quality in many world producers. As noted by Castillo et al. [11], for centuries wine has been regarded as a European product, and it still is, considering that 75% of its production and consumption concerns European countries, while only the remaining 25% occurs in the so-called New Wine World (mainly the USA, South Africa, New Zealand, Australia, and Chile). At the same time, trade has remarkably increased, especially in terms of value, in recent decades; thus, wine has become one of the most internationally traded agri-food products [11,12,13].

In this enlarged scenario, imports from European countries also grew, like those from the United Kingdom, together with those from non-EU importers, including traditional buyers, such as the USA, but also relatively newer importers, such as Australia, Russia, Japan, and, more recently, China.

As for EU exports, Italy, France, and Spain have been the main competitors in both EU markets and external ones. However, according to some authors, some of the EU partners suffered from restrictions on the extra-EU markets more than others, like Spain and Portugal [14]. Only recently was Spain able to differentiate its export flows towards non-EU high-income countries—especially for wine and olive oil—while Portugal remains heavily dependent on imports from the EU, more so than other EU exporters.

Lombardi et al. [15] analyzed the main EU wine exporters’ performance in the European market, especially in the UK and Germany, which are the most relevant European importers for both bottled wines and bulk wines. Limiting the results to the first category, the authors’ findings note the good performance of Italy and Spain in terms of quantities exported, while France’s results were quite flat over time; however, France showed a higher capacity to create value over time, so keeping a constant advantage compared to Italy and Spain. Marco-Lajara et al. [16] also confirmed the marked increase in the volume of Spanish wine exports. The increase in volumes exported by Italy and Spain has also led, over time, to an increase in their exports of bulk wine, while France, being strictly oriented toward higher market segments, never really increased its sales of this type of wine.

Correia et al. [8] noted that the positive long-run trend was boosted by the trade liberalization process. However, this increase has not been steady: its positive trend shows cyclical fluctuations that involve all of the major EU exporters (Italy and Spain especially). This “European cycle” is partially a result of the common policies affecting production and exports, highlighted by different scholars [17,18], and can be relevant in assessing future tendencies.

The driving factors of the rapid change in the patterns of wine trade flows are many and diverse, such that it is not surprising that the overall emerging picture is rather complex and moving fast. General economic features (especially countries’ income levels, trends, and distribution) combine with lifestyle issues, consumption habits, fashion trends, and proximity issues (geography, language, and culture), all of these boosting both quality and price competition. Other authors have focused on the change in the globalization process of the wine industry in recent decades due to the rise of new producers and exporters in the world market [11]. Moreover, this rapid change occurred while wine production and consumption were declining slowly but steadily all over the world. The success of the new exporters has also contributed to a deep change in traditional EU exporters: while they remain the major players in world wine markets, it is noticeable that in the late 1980s their exports covered almost 90% of total exports in terms of volume, but this share dropped down to 65% in the early 2010s. This trend made intra-EU competition more intense, while under its influence exporters’ strategies diversified and became more complex, with wineries and sellers upgrading product quality, enlarging the range of wines offered, and changing product typologies, packaging, and prices.

3. Materials and Methods

3.1. A Conceptual Framework for Trade Analysis Based on Sophistication

The analysis presented here is aimed to analyze in which ways the major European wine exporters compete with each other in destination markets. In greater detail, we seek to assess the kind of market segments and targets they achieve and to what extent these are overlapping and/or diversified. Additionally, we explore the time changes in these competitive dynamics.

This goal is pursued by combining the use of the traditional AUV index with the C-Consy index. Other trade measures (such as export shares and penetration rates) are also applied; however, the combined use of AUV and C-Consy is the core of our proposals and their element of originality. The combination allows for examining the role of quality from different perspectives. The AUV captures the quality of the products exported, under the hypothesis that the average unit value of the export flow is a proxy of its quality content [19]. The new C-Consy index depicts the markets where the goods are destined, and hence the kind of competition engaged in by the exporters [20,21]. Together, the two indicators provide a clearer picture of the export strategies of each exporter and allow for comparisons across different countries. Furthermore, we also show the joint dynamics of these indicators during the last decade, achieving insights into how these exporters moved so far in the world wine arena.

The use of C-Consy is relatively recent in the trade literature, so it requires thorough illustration. It belongs to the family of so-called trade sophistication indices, which infer the quality level of traded goods based on countries’ per capita GDP. The term sophistication encompasses aspects such as technology, branding, style, packaging, sensory attributes, and any other feature that increases products’ value. The idea behind this family of indicators is that there is a direct relationship between income levels and product sophistication. The sophistication measure initially referred to exported goods and was associated with the level of wealth of exporting countries, as determined by their level of per capita GDP and measured by the Prody index [22,23,24,25]. The core idea is that richer countries have more competence, experience, and capacity to produce as well as export high-value sophisticated goods. By achieving higher prices, these goods better reward inputs and further push up GDP. In greater detail, the index that measures the “sophistication” level of exported goods, the so-called Prody index, is the weighted average of the per capita GDP of the exporting countries of a given good, where the weights are export shares or similar measures [22,23].

However, it has also been observed that there is a significant association between the diversification as well as quality of goods and the demand for imports, and that this relation rises with income [24,25,26]. Hallak [24,27] studied the role of quality in bilateral trade and confirmed that richer countries tend to import higher-quality goods from richer exporters. This suggests that supply and demand features both play a role as trade drivers, and that they deeply influence each other. Based on this idea, we switched the original logic on which Prody is based, to build a symmetric index that looks at the demand side and measures the sophistication of imports [20,21]. The simple fundamental idea is that richer countries import more sophisticated, higher-value-added goods. In other words, the income level of the destination markets indicates the kind of competition engaged in and potential profitability. Competition in richer markets relies more on quality, complexity, diversification, innovation, and so on, while price competition is more intense in less rich markets. This implies that more complex competitive strategies are required in destination markets with higher sophistication levels.

The theoretical scheme which the paper is based on is presented in Figure 1. The left-hand side of the figure indicates that the per capita GDP level influences the country’s endowment of skills and inputs: higher income levels are associated with a better endowment of resources suited for producing high-quality, innovative, and, in one-word, sophisticated goods. This assures these countries a competitive advantage in international markets [28] so that they become exporters of such high-value goods [22,23,29,30]. This, in turn, fosters economic growth [31].

The right-hand side of the figure indicates that the per capita GDP level influences a country’s demand of goods, as richer consumers demand innovative, high-quality, varied, and, in one-word, sophisticated goods [27,32]. This demand, in turn, also drives sophisticated imports [27,33,34].

Moving to the simple mathematical expression of the index, we followed previous works [21,22,23,24,29,31], adapting it to the importing of quality goods (right side of Figure 1). The formula for each imported good, i, is as follows:

Consy_i = Σ_j GDPpc_j × c_ij

(1)

where GDPpc_j is the per capita income of importing country j and cij is the share of total world imports of item i imported by country j: M_i,j/M_iw, where M_i,j indicates the value of product i imported by country j and M_iw is the world imports of product i.

The implications here are that the higher the role of high-income countries in the importing of a good, the higher the Consy and the more sophisticated the import demand for that product. The vector of the Consy indices provides a product ranking based on its sophistication on the import side.

In the analysis proposed in the next pages, we build country-specific Consy indicators that we call C-Consy, each referring to a specific exporter and accounting only for its own clients. In this case, the interest is focused on the different destination markets reached by the different exporters that are potential competitors. In other words, the C-Consy index allows us to compare the sophistication levels of the destination markets of the different exporters for a given traded item and, thus, to assess their competition potential. The C-Consy formula is as follows:

C-Consy_i = Σ_gGDPpc_g × c_ig

(2)

where GDPpc_g is the per capita income of importing country g that imports from country C, and c_ig is the share of total imports from country C of item i imported by country g: M_ig/M_ic, where M_i,g is the value of product i imported by country g and M_ic is the total value of imports of product i from all the clients of country C.

We also analyzed the time changes in sophistication, focusing on the evolutionary path of exporters. With respect to time trends, the index varies subject to GDPpc variations—i.e., changes in the wealth of the importing countries—and/or subject to variations in the geography of trade—i.e., changes in the set of clients’ countries and/or in their import shares.

In symbols, it is as follows:

VarC-Consy_i = LnC-Consy2_i − LnC-Consy1_i

(3)

where C-Consy2_i = the Consy measured at time 2 and C-Consy1_i = the Consy measured at time 1.

Ln indicates the natural logarithm that approximates the percentage variation and allows for summing the different components of the total variation.

Hence:

VarC-Consy_i = GDPpcE + GEOE

(4)

and the GDPpc effect is as follows:

GDPpcE = LnC-Consy2_i − LnC-ConsyK2_i

(5)

where C-ConsyK2_i is the Consy at time 2 but measured with constant GDP per capita (i.e., GDP at time 1).

Finally, the changes in the geography of trade (hereafter called the GEO effect) are captured by the following:

GEOE = LnC-ConsyK2_i − LnC-Consy1_i

(6)

where having kept the GDPpc invariant, the difference between the two terms is entirely due to changes in the set of importing countries and to variations in their share of imports.

The GDP effect is due to the net change in the per capita GDP of all the importing countries. A positive GDP effect reflects income growth in importing countries and thus indicates that the markets where that exporter is selling are becoming richer and hence more sophisticated, and potentially more rewarding. Even more interesting is the GEO effect, which depends on the change in the set of countries importing a specific good in the period considered. In other words, the GEO effect reflects a relocation of export flows, which can be due to the capacity to enter into new markets as well as to a change in export shares in already-existing clients.

As mentioned, we combine the analysis of wine trade flows based on the import sophistication index with the more traditional AUV, obtained by dividing the export flow measured in terms of value by the same export flow measured in terms of quantity. The AUV is a weighted average of the prices of the goods forming the export flow; as such, it is commonly used in trade analysis as an indicator of product quality, although some limitations have been highlighted for its use as a proxy of quality [19,34,35].

AUV_{i,j =} XV_i,j/XQ_ij

where AUV_i,j is the average unit value of exports of product i by country j; XV_i,j is the export flow at the current price of product i by country j, and XQ_ij is the same flow but measured in quantities.

Furthermore, the core analysis just described is introduced by presenting the export shares and penetration rates of the selected exporters in the major wine world importers, where the penetration rate is defined as the share of exports from one given exporter over the total imports of a selected importer for a given product. In our case, this is calculated on trade flows measured in values:

PR_i,j,g = M_i,j,g/M_i,w,g

where PR_i,j,g is the share of product i exported by country j in client g; M_i,j,g is the value of imports of client g from exporter j of product i; and M_i,w,g is the total flow of imports from the world of country g for product i.

3.2. Data

The six EU wine exporters—Italy, France, Spain, Germany, Portugal, and Hungary—together represent more than 90% of EU wine exports, and are at the top of the EU rankings of wine export in terms of value, with the only exception of Hungary, ranking tenth, which has been chosen as it has been particularly dynamic in recent years, switching to a high level of quality produce. These countries are traditionally important European producers and as such have seen worldwide renown, and are also proper net exporters rather than re-exporting wine coming from other parts of the world.

The data were taken from the United Nations ComTrade databank. The set of importers considered in the analysis includes 130 countries accounting for almost 100% of wine import flows for the years 2019/2022. For each export country, the C-Consy is determined by considering the whole vector of 130 importers, even though not all of the 6 exporters necessarily sell to all of the 130 potential destination markets. The other indicators are built on the total export flows resulting from the aggregation of the 130 importing partners. The reason why we chose 2022 was to skip the biennium 2020–2021, which was highly influenced by the pandemic [3,4], which had a particularly strong effect on voluptuary consumptions such as wine, especially in the Horeca sector [36,37,38]. Even if 2022 was partially influenced by the Russian invasion of Ukraine and the consequent trade restrictions as well diversions, we could not refer to more recent years due to the incompleteness of the dataset at the time data were retrieved. In the analysis of time variation, the average data of the years 2019 and 2022 were compared to the average data of the biennium 2010–2011. Biennial data are calculated in order to stabilize values and reduce the impact of odd variations in a ten-year time span analysis that we are not interested in. Trade flows are defined at the 6-digit level of HS-1996. The selected items are code 220421 (bottled still wine) and code 220410 (sparkling wine). Data are in current US dollars and in tons. (Please note that, although export changes at current values include the effects of inflation, they have the advantage of also reflecting the effects of quality upgrades and of any other new features able to increase product prices, which is key in our analysis. In addition, it must be said that, in the observed decade, inflation rates around the world have been relatively low). The GDPpc is released by the World Bank (world development indicators), measured in US dollars at 2017 purchasing power parity (PPP) values.

4. Results

4.1. The Current Picture

The EU Member States selected for our analysis represent almost 65% of world exports of still bottled wine and slightly less than 90% of world exports of bottled sparkling wine. Hence, countries not considered in this analysis (other European producers and all non-EU countries) cover 36% of total exports of still bottled wine and only around 12% of sparkling wine exports. Among the focus countries, the group leaders are France and Italy, with them both leading the still bottled wine market, together covering almost 50% of the market, and France dominating the sparkling wine world market (Figure 2a,b).

In absolute values, overall world wine exports are worth more than USD 30 billion, three-quarters of which are still wines and a quarter are sparkling wines (

Table 1. Values of exports at current USD million.

	Still Bottled Wines		Sparkling Bottled Wines
	2010–2011	2019 and 2022	2010–2011	2019 and 2022
France	5129	6493	2902	4191
Germany	995	867	132	124
Hungary	47	59	13	7
Italy	4393	5155	667	1995
Portugal	754	825	13	11
Spain	1700	1873	505	504
Others (rest of the world)	7186	8342	620	1000
World	20,205	23,614	4852	7831

Source: our findings from the ComTrade dataset.

). Exports from the selected European exporters exceed USD 22 billion, of which more than USD 15 billion are still wines and almost USD 7 billion are sparkling ones. The details of the values for the selected countries show the differences that distinguish them, both in terms of the size of exports and in their dynamics, but also in the relative importance of the two types of wine analyzed. These differences are the basis of the interest in the insights that follow in the rest of this section.

The market shares in the world’s major clients (i.e., penetration rates) shed light on the positioning of the six European exporters. Looking at the imports of still wine (Figure 3a), the selected EU exporters hold the largest shares of these markets, with France prevailing in some destinations (the UK, the Netherlands, Japan, and Belgium) and Italy in others (the USA, Germany, Switzerland, and Denmark). However, it must be noted that Germany holds very small shares in all destination markets and Hungary is only present with a minimum quota in the Canadian sparkling wine market. Meanwhile, Hungary does not sell significant amounts of wine in the Russian Federation, despite their former strong economic relationship. It is also worth mentioning that non-EU exporters are more capable of entering the newer markets of China and Russia. In these two markets, we note that France has a better position in China and Italy in Russia, while Spanish wine features only marginally in both markets.

The capacity of France and Italy to reach a wide range of markets is even more apparent in the case of sparkling wine (Figure 3b). France in particular dominates these markets, with the only exceptions of China, Japan, and Russia, where other producers gain larger market shares. It is worth highlighting that Italy has a high capacity for penetrating the French market for imported sparkling wine.

The analysis of the AUV reveals a strong differentiation among exporters (Figure 4). France leads the ranking of AUVs, being the only EU seller with AUVs above the world average. However, the gap with the other countries of the group is much larger for sparkling wine than for still wine. In fact, in the first case France’s AUV is, on average, about four times higher than that of other countries, while for still wine, on average, it is no more than double. It is worth noting that the AUVs of sparkling wines are higher than that of still wines. The only exceptions are Italy and Spain, for which the two AUVs are almost equal.

In analyzing the sophistication of the destination markets of our focus exporters (

Table 2. The C-Consy index for selected European wine exporters.

2019 and 22	Still Wine	Sparkling Wine
	USD (PPP)
France	50.155	54.584
Germany	50.879	47.880
Hungary	42.316	39.648
Italy	53.253	49.938
Portugal	46.026	38.292
Spain	47.260	49.425
World	48.478	51.330

Source: our findings from UN and WB data.

and Figure 5), the overall high Consy values associated with bottled wines are not surprising when considering that the three major world importers for bottled still wine are the United States, the United Kingdom, and Germany, while for sparkling wine, Germany is replaced by Japan. Evidently, we are talking about reaching sophisticated markets with high income elasticity for “luxury goods”, where drinking wine is also a status symbol. It is also connected to lifestyle and the association of wine with Western diets and social behaviors [1,39,40].

For bottled wines, Italy ranks at the top (USD 53,253) while Hungary is at the bottom (USD 42,316). Italy, France, and Germany place themselves above the average world value (i.e., the “global” Consy). As for sparkling wine, the range of values is wider: from USD 54,584 for France to USD 38,292 for Portugal. In this case, it is only France that is above the world value, showing how much France’s score has an influence on the average world value. European exporters seem to confirm the findings of previous works; that is, rich wine exporters trade especially with more sophisticated import markets, with France and Italy in the leading positions (it is worth highlighting that previous studies have analyzed the import sophistication levels of the whole range of agri-food exported goods, showing that wine scores rather high, especially sparkling wines [20,21]).

Figure 5 shows that there are two distinctive countries, Portugal and Hungary, that do not keep up with the rest of Europe and remain well below the world average; the second group, accounting for the remaining focus exporters, clearly contributes to defining the world values, with France (for sparkling wines) and Italy (for bottled wines) in the lead.

Looking jointly at the AUV and the C-Consy (Figure 6) shows that while both France and Italy enter highly sophisticated country markets, France occupies higher market segments than Italy in these destinations.

This is especially true for sparkling wine but also holds for still wines. In contrast, Spain, the third highest world exporter, reaches slightly less sophisticated markets where it sells slightly lower quality wines compared to Italy. Almost the same holds true for Germany. As for Portugal, this is the only exporter of the group selling to countries at very different sophistication levels for the two wine typologies: much higher for still wine than for sparkling ones. However, for the latter typology, it manages to place its products in relatively higher market segments. Last, Hungary places its wines in low segments of much less sophisticated markets.

4.2. Dynamic Analysis

The dynamic analysis looks at the time span between 2010–2011 and 2019 and 22 and starts by looking at the changes in the wine export flows (Figure 7a,b). Regarding still wines (Figure 7a), the graph shows generalized growth, except for Germany, whose exports decline. In greater detail, Hungarian and Portuguese exports growth both in terms of value and quantity, and it seems that quantity drives the change. In contrast, France and Italy expand the values of their exports by upgrading quality and reducing quantity, while Spain manage to increase the export value and keep the quantity flow constant. The case of sparkling wines appears quite different (Figure 7b); here, the change is led by the huge increase in Italian exports, which nearly tripled in terms of both value and quantity. French sparkling wine exports also increased significantly, even if not so notably as Italian ones; Spain and Germany followed at a moderate pace, while Hungary and Portugal went backward.

As for the C-Consy index, its variations over the decade allow us to obtain relevant insights into the different paths followed by the exporters (

Table 3. C-Consy variations, GDP and GEO effects, and variations in AUVs for still and sparkling wines (2010–2011 to 2019 and 2022).

	AVU % Variation	C-Consy LN Variation	GEO Effect	GDP Effect	AVU % Variation	C-Consy LN Variation	GEO Effect	GDP Effect
	still wine				sparkling wine
France	49.2	16.5	2.5	14.0	−5.6	15.1	1.2	13.9
Germany	4.0	12.1	−1.7	13.8	−17.3	7.4	−5.0	12.5
Hungary	2.3	18.1	1.5	16.6	−20.6	1.4	−18.2	19.6
Italy	21.3	10.6	−2.1	12.7	10.3	11.9	−1.2	13.0
Portugal	−8.9	12.1	0.4	11.6	32.0	47.0	36.7	10.3
Spain	9.8	9.6	−4.0	13.7	−17.1	8.0	−3.6	11.6

Source: our findings from the ComTrade database.

and Figure 8a,b). Looking at both graphs, we see that the index always exhibits a positive trend, with the only exception of Hungary for sparkling wine. However, the magnitude of the variations differs, and is particularly large for sparkling wines. Second, we see that the GDP effect is also always positive, but smoother across countries for still wine, while it is much more varied for sparkling wine. As for the GEO effect, for both kinds of wine we observed positive as well as negative variations, and often the signs are aligned between the two wines for each exporter. Summing up, we can say that while the total C-Consy variations are mostly determined by the GDP effect, the differences in the variations among countries are mainly due to the varied GEO effect. This effect is particularly interesting in the context of our analysis because it expresses changes in the geographical directions of trade flows reflected in the average income of importers, and thus in the kind of competition met by the exported goods. Indeed, we can see that Italy, Spain, and Germany downgraded their export flows towards both relatively poorer and less sophisticated countries. On the contrary, France and Portugal managed to upgrade towards richer, more sophisticated countries (Portugal in particular saw a big jump in sparkling wine exports); finally, Hungary is the only country that exhibited contrasting tendencies, with little improvement for still wine and a substantial worsening for sparkling wine.

Finally, we looked at the joint dynamics of the GEO effect (i.e., the C-Consy variation due to changes in the set of clients), of the AUVs, and of the value of export flows (Figure 9a,b). This allows us to obtain more specific insights, also in comparative terms, about how each country meets destination markets and of the kind of competition faced.

For both wine typologies, the graphs show that countries are quite scattered, indicating that their evolutionary patterns differ for both products. As for still bottled wine, the only countries who managed to redirect their export flows into more sophisticated markets are France and, in a much more limited way, Hungary. Furthermore, the export flows of both products significantly increased, even if the respective initial values substantially vary, such that the achievements of France are much more noticeable. In addition, France also managed to further increase AUVs, while Hungary did not. In contrast, Italy and Spain managed to increase their export flows and upgrade the AVUs of the wines that they export, but redirected flows into less sophisticated markets (this is especially strong for Spain). Portugal, as far as it is concerned, followed a different path, as it oriented its increased exports towards slightly more sophisticated markets but somewhat decreased product quality (AUV). It seems that its strategy has been to target lower market segments of richer countries. Last, Germany lost the competition game, as is shown by the decreasing flow of exports of almost unchanged quality targeted at less sophisticated markets.

The portrait rendered by Figure 9b in relation to sparkling wine is totally different. Here, Portugal seems to have accepted a reduction in exports in order to pursue a huge upgrade in quality in order to position itself in much more sophisticated markets. Hungary, Germany, and Spain achieved negative results in every direction, as the quality of their sparkling wines worsened, they reoriented exports towards poorer clients and eventually observed a reduction in exports. France remained almost stationary at the initial positioning, while Italy slightly redirected exports towards less sophisticated markets but achieved higher market segments with much increased export flows.

5. Discussion and Main Conclusions

This study, moving from a relatively recent swath of literature based on trade sophistication and quality competition, explored the export flows of still and sparkling wines, looking at changes in the positioning of the main EU exporters and focusing on destination markets throughout the last decade. The focus of the analysis was on the quality of exports and the sophistication of the destination markets. This was performed by combining the traditional AUV and the more innovative C-Consy indicator that, together, enable a comprehensive assessment of the kind of competition that exporters engage in with each other. Furthermore, the dynamic analysis provided some insights into the changed positionings of these major European wine exporters.

The six European wine exporters on which our analysis focused represent traditional and stable wine exporters. As such, they collectively make up the world leaders of the industry, contributing almost two-thirds of world trade for still wine and an even larger share for sparkling wine. Some of them, especially France and Italy, hold the largest shares of the most important world importers, even if this does not apply to large and relevant importers such as Russia and China [4,40]. However, with new non-EU exporters increasing in prominence, their shares have reduced and competition within as well as outside the group has become more intense [41].

The C-Consy index adds to the traditional literature and analyses on trade competitiveness for different reasons. One is that the indicator can synthesize large amounts of information, combining the GDPpc with the weighted specialization of each exporter and with the conditions of importing markets. A second one, linked to the previous one, is that the knowledge of the sophistication of the importing markets can be very relevant in terms of export strategies, as well as in evaluating the risks and opportunities raised by specific choices regarding the level of quality, branding, selling, and logistics of the exporting countries.

The picture we have drawn is quite extensive in terms of static results, and even more so in terms of time trajectories. It is worth summing up the results by confronting the overall situation depicted for each of the countries under study. On the positive side, there is first France, with an outstanding position reached nowadays thanks to its ability to reach high market segments of sophisticated, highly rewarding countries, and further improving its results throughout the decade, especially by a further increase in still wine exports. Italy shows a more mixed pattern in the period observed: it does well as it also reaches high market segments of very sophisticated countries; however, throughout the decade its flows of exports were partially redirected towards less sophisticated countries. It is worth stressing here the massive increase in Italian exports of sparkling wine, confirmed also by other studies on the matter [42]. Spain and Germany were somehow coupled, both selling intermediate-quality wine in relatively less sophisticated markets; furthermore, they lost ground in terms of sophistication for both still and sparkling wines, and this has been partially compensated for by the capability to upgrade quality, but only for still wine for which, however, Spain kept its flows while Germany faced a reduction. Another story is that of Portugal, whose dynamic is characterized by quite different positions for still and sparkling wines. In greater detail, for sparkling wine Portugal enjoyed relevant improvements in terms of both clients and market segments, but at the expense of declining flows. On the contrary, exports of still wine increased by occupying lower market segments of relatively more affluent clients. Portuguese wine export performance has been found to be deeply influence by limited firm size [43]. Finally, Hungary exhibited much more fragile performance in both products, as it competed in lower market segments of less rewarding clients. However, while it actively tried to catch up for still wine [2], the exports of which significantly expanded, Hungary further downgraded with regard to sparkling wine, the flows of which have steadily reduced [44].

Given these results, which are in line with findings from other comparative works [45], some caveats are also necessary. The different positionings of EU exporters in terms of trade sophistication need to be considered as strategic components that do not necessarily translate into better or worse performance. In fact, the result of specialization in higher- or lower-quality products can also be the result of a specific strategy, especially when the wine produced is not particularly high-quality or of a high reputation. Countries such as Spain and Portugal have shown, in recent years, the ability to reach a wider set of importers, rather than improving quality and selling to more sophisticated buyers. The case of Hungary is different, since its lower positioning might be due more to limits in know-how and proficiency than to a specific exporting strategy [44].

Within this frame, our results contribute to the existing literature with the investigation of two main aspects. One is the positioning of the main EU exporters on the international markets and pointing out the differences between them, and this goes beyond the apparent similarities in terms of strategies and product differentiation. The second is the main outcomes derived from the kinds of competition and levels of sophistication that these countries face on the international markets. In the last decade, the geography of the wine trade has changed quite significantly, and it is still changing, with a high number of aggressive competitors joining the arena and forcing traditional exporters to modify their strategies for international markets. At the same time, the sophistication and wealth of the main importers have also changed significantly over the last few years, with new actors joining the markets as buyers (China, Southeast Asia, Russia, and Japan, to mention the most relevant ones; Arab countries, such as the UAE, have also become well integrated into international markets). The responses to these changes have been diverse across countries, as shown previously. The strong and growing competition has a relevant effect on the evolution of the sophistication of both still and sparkling wines, and, hence, also impacts the competitive arena [21]. The index used here, the C-Consy index, integrated with more traditional indices, shows that the sophistication level of destination countries is changing significantly, as are the target market segments. Reputation and well-established positions in world markets are relevant factors for accessing more sophisticated and more rewarding clients.

We acknowledge that beyond its originality and multidimensional perspective on trade, our approach also has some limits. In our view, its major limit is not being able to look at the inside diversification of the trade flow of each country. This is clearly a limitation given the high level of segmentation of the wine market and deserves future investigation. Nevertheless, looking at this characteristic from another point of view, it can also be said that the mentioned fragmentation also requires synthesis beyond specific and more detailed results. Desirable perspectives for this kind of analysis are, therefore, able to count equally on more detailed and even punctual research, together with more aggregated approaches, similar to the one presented here.

Lastly, from a policy perspective, the selling strategies of the EU countries analyzed seem quite varied, and this responds to the high degree of diversification of consumer demand within as well as across countries. In other words, this diversity is not a problem per se, as it allows us to consider and measure the different opportunities arising in different market segments. However, higher market segments and more sophisticated country markets, besides being more complex to manage and satisfy, as well as requiring more challenging and quickly evolving competitive strategies, allow for higher value added and, therefore, for the more appropriate remuneration of resources. This directly points towards the need for sectoral and trade policies to help exporters innovate, improve quality, and catch up with competitors in more exigent sophisticated markets.